INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses and approximate fair value of the investment securities portfolio at the dates indicated were:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at September 30, 2015
U.S. Government-sponsored agency securities	$	100	$	5			$	105
State and municipal	289,998		11,617		$	497	301,118
U.S. Government-sponsored mortgage-backed securities	287,317		7,635		73		294,879
Corporate obligations	31						31
Equity securities	1,706						1,706
Total available for sale	579,152		19,257		570		597,839
Held to maturity at September 30, 2015
State and municipal	218,794		5,707		166		224,335
U.S. Government-sponsored mortgage-backed securities	392,160		11,566		213		403,513
Total held to maturity	610,954		17,273		379		627,848
Total Investment Securities	$	1,190,106	$	36,530	$	949	$	1,225,687



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale at December 31, 2014
U.S. Government-sponsored agency securities	$	100	$	9			$	109
State and municipal	216,915		11,801		$	123	228,593
U.S. Government-sponsored mortgage-backed securities	310,460		8,771		127		319,104
Corporate obligations	31						31
Equity securities	1,706						1,706
Total available for sale	529,212		20,581		250		549,543
Held to maturity at December 31, 2014
State and municipal	204,443		5,716		96		210,063
U.S. Government-sponsored mortgage-backed securities	426,645		11,527		512		437,660
Total held to maturity	631,088		17,243		608		647,723
Total Investment Securities	$	1,160,300	$	37,824	$	858	$	1,197,266

The amortized cost and fair value of available for sale and held to maturity securities at September 30, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at September 30, 2015:
Due in one year or less	$	3,661	$	3,715	$	5,521	$	5,533
Due after one through five years	13,265		13,854		24,076		25,086
Due after five through ten years	51,070		53,347		81,286		83,355
Due after ten years	222,133		230,338		107,911		110,361
	$	290,129	$	301,254	$	218,794	$	224,335
U.S. Government-sponsored mortgage-backed securities	287,317		294,879		392,160		403,513
Equity securities	1,706		1,706
Total Investment Securities	$	579,152	$	597,839	$	610,954	$	627,848



	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity Distribution at December 31, 2014
Due in one year or less	$	3,127	$	3,153	$	6,258	$	6,329
Due after one through five years	9,565		9,840		18,440		18,930
Due after five through ten years	48,675		50,889		85,997		87,903
Due after ten years	155,679		164,851		93,748		96,901
	$	217,046	$	228,733	$	204,443	$	210,063
U.S. Government-sponsored mortgage-backed securities	310,460		319,104		426,645		437,660
Equity securities	1,706		1,706
Total Investment Securities	$	529,212	$	549,543	$	631,088	$	647,723

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $646,124,000 at September 30, 2015, and $449,408,000 at December 31, 2014.

The book value of securities sold under agreements to repurchase amounted to $149,014,000 at September 30, 2015, and $120,027,000 at December 31, 2014.

Gross gains on the sales and redemptions of available for sale securities for the three and nine months ended September 30, 2015, and 2014 are shown below.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Sales and Redemptions of Available for Sale Securities:
Gross gains	$	1,115	$	910	$	2,147	$	2,335
Gross losses					100
Other-than-temporary impairment losses

The following table shows investments securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2015, and December 31, 2014:



	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at September 30, 2015
State and municipal	$	36,702	$	497					$	36,702	$	497
U.S. Government-sponsored mortgage-backed securities	6,482		8		$	2,125	$	65	8,607		73
Total Temporarily Impaired Available for Sale Securities	43,184		505		2,125		65		45,309		570
Temporarily Impaired Held to Maturity Securities at September 30, 2015
State and municipal	13,711		144		1,716		22		15,427		166
U.S. Government-sponsored mortgage-backed securities	20,752		40		13,491		173		34,243		213
Total Temporarily Impaired Held to Maturity Securities	34,463		184		15,207		195		49,670		379
Total Temporarily Impaired Investment Securities	$	77,647	$	689	$	17,332	$	260	$	94,979	$	949



	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Temporarily Impaired Available for Sale Securities at December 31, 2014
State and municipal	$	1,256	$	7	$	9,850	$	116	$	11,106	$	123
U.S. Government-sponsored mortgage-backed securities	2,186		13		5,447		114		7,633		127
Total Temporarily Impaired Available for Sale Securities	3,442		20		15,297		230		18,739		250
Temporarily Impaired Held to Maturity Securities at December 31, 2014
State and municipal	5,119		96		250				5,369		96
U.S. Government-sponsored mortgage-backed securities	9,791		82		38,491		430		48,282		512
Total Temporarily Impaired Held to Maturity Securities	14,910		178		38,741		430		53,651		608
Total Temporarily Impaired Investment Securities	$	18,352	$	198	$	54,038	$	660	$	72,390	$	858

Certain investments in debt and equity securities are reported in the financial statements at an amount less than their historical cost as indicated in the table below.



	September 30, 2015			December 31, 2014
Investments reported at less than historical cost:
Historical cost	$	95,928		$	73,249
Fair value	$	94,979		$	72,390
Percent of the Corporation's available for sale and held to maturity portfolio	7.9		%	6.1		%

Management believes the decline in fair value for these securities was temporary. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income during the period the other-than-temporary ("OTTI") is identified.

The Corporation’s management has evaluated all securities with unrealized losses for OTTI as of September 30, 2015. The evaluations are based on the nature of the securities, the extent and duration of the loss and the intent and ability of the Corporation to hold these securities either to maturity or through the expected recovery period.

In determining the fair value of the investment securities portfolio, the Corporation utilizes a third party for portfolio accounting services, including market value input, for those securities classified as Level 1 and Level 2 in the fair value hierarchy. The Corporation has obtained an understanding of what inputs are being used by the vendor in pricing the portfolio and how the vendor was classifying these securities based upon these inputs. From these discussions, the Corporation’s management is comfortable that the classifications are proper. The Corporation has gained trust in the data for two reasons: (a) independent spot testing of the data is conducted by the Corporation through obtaining market quotes from various brokers on a periodic basis and (b) actual gains or loss resulting from the sale of certain securities has proven the data to be accurate over time. Fair value of securities classified as Level 3 in the valuation hierarchy was determined using a discounted cash flow model that incorporated market estimates of interest rates and volatility in markets that have not been active.

State and Municipal

The unrealized losses on the Corporation’s investments in securities of state and political subdivisions were caused by changes in interest rates. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Corporation does not intend to sell the investment and it is not more likely than not that the Corporation will be required to sell the investment before recovery of its new, lower amortized cost basis, which may be maturity. The Corporation does not consider the investment securities to be other-than-temporarily impaired at September 30, 2015.

U.S. Government-Sponsored Mortgage-Backed Securities

The unrealized losses on the Corporation’s investment in U.S. Government-sponsored mortgage-backed securities were a result of changes in interest rates. The Corporation expects to recover the amortized cost basis over the term of the securities as the decline in market value is attributable to changes in interest rates and not credit quality. The Corporation does not intend to sell the investment and it is not more likely than not that the Corporation will be required to sell the investment before recovery of its new, lower amortized cost basis, which may be maturity. The Corporation does not consider the investment securities to be other-than-temporarily impaired at September 30, 2015.

Credit Losses Recognized on Investments

Certain corporate obligations experienced fair value deterioration due to credit losses and other market factors. The following table provides information about those securities for which only a credit loss was recognized in income and other losses were recorded in other comprehensive income.



	Accumulated Credit Losses in 2015			Accumulated Credit Losses in 2014
Credit losses on debt securities held:
Balance, January 1	$	500		$	11,355
Reductions for previous other-than-temporary losses realized on securities sold during the year	(500		)	—
Balance, September 30	$	—		$	11,355

In the first quarter of 2015, the Corporation sold its remaining trust preferred security which had no remaining book value as a result of OTTI of approximately $500,000 taken in 2009. The sale of this security resulted in a gain of $45,000, which is included in the Consolidated Condensed Statement of Income for the nine months ended September 30, 2015.